Cyprus displayed strong resilience in recent years, with many sectors driving the Cyprus economy into a period of growth and expansion with industries such as tourism, financial services, and energy. A number of sectors in Cyprus are forecasted to continue being major global contributors in 2023 and present many benefits for business owners, foreign investors, and entrepreneurs.
The Aspen Trust Group reviews the most promising outlooks from the sectors driving the Cyprus economy for 2023 that will maximize opportunities for business and investment in the next year.
2022-2023 Growth at a Glance
Cyprus has demonstrated strong economic resilience despite the adverse efforts of the Covid-19 pandemic. In 2022, Cyprus displayed an annual GDP growth rate of 5.5%, becoming a leader among EU nations. Although GDP growth for 2023 is expected to be around 1.1%, Cyprus will remain positive while the majority of European countries will likely see negative growth percentages.
Other competitive economic indicators include:
- A governmental surplus forecasted to rebound from a negative 1.7% in 2021 to a positive 1.1% for both 2022 and 2023
- A continued increase in government revenues, which grew to 10.2% in 2022 and are forecasted to continue to rise in 2023 and 2024 despite globally high inflation
- A large drop in debt-to-GDP within the next few years, decreasing from 101.0% in 2021 to 89.6% in 2022, and further descending to 84.0% and 77.7% in 2023 and 2024, respectively
- A 2nd place ranking among EU nations for the rate of immigration in comparison to jurisdiction size; Cyprus has nearly 200,000 foreign nationals with a large expatriate community from the United Kingdom and Russia.
Expansive Tech, Entrepreneurial, and Innovation Sectors Driving the Cyprus Economy
Among the strongest performers within the jurisdiction’s industries, the technology sectors are driving the Cyprus economy forward in 2023 and earning the jurisdiction recognition as a key force within the European market. Some of the most notable technological industries experiencing robust growth include:
The Fintech sector in Cyprus has grown rapidly as more international businesses and investors have relocated to the jurisdiction. The draw of start-ups and technology companies is a contributing factor to the rise in Fintech as one of the sectors driving the Cyprus economy. The government has been supportive of the industry and working to create a favorable environment for fintech companies. Reporting on Q3, the Cyprus Securities and Exchange Commission (CySEC) oversaw an increase to over 300 Management Companies and Undertakings of Collective Investments (UCIs) which net €9.9 billion in assets, €3.1 million of this sum was invested into the fintech sector.
Information and Communications (ICT) Services
The ICT sector in Cyprus has expanded as well, particularly in the areas of software development, web design, and digital marketing. The government has been supportive of the industry and has been working to create a favorable environment for IT services companies. The latest data from the Business Facilitation Unit (BFU) estimated that this sector alone has injected roughly €3 billion into the economy and encouraged the European Commission to increase Cyprus’s forecasted growth rate of 5.6%.
The start-up ecosystem in Cyprus was relatively small a few years back but has drastically expanded with active government initiatives aimed at providing incentives and support for new foreign business arrivals in this industry. In 2022, Cyprus listed over 450 start-ups valuing over €3.7 billion, and several non-profit IT associations such as TechIsland, introduced in 2021, began promoting Cyprus as an innovation and entrepreneurial hub for world-class talent.
The government of Cyprus promotes innovation and entrepreneurship leadership and investment by offering tax incentives and support for start-ups and technology companies. The latest announcement from Cyprus was the allocation of €10 million through the DISRUPT programme for innovative start-ups and the proposal submission process was already open to the public. With greater public and private efforts taking place with the jurisdiction, the Global Innovation Index once again moved Cyprus up on its ranking index for 2022, highlighting the country as 27th out of 132 jurisdictions.
Recently hosting the 8th International Funds Summit with more than 500 global delegates in attendance, Cyprus highlighted how the funds industry has tripled in size since 2016. Within that time frame, Cyprus has accumulated 24% of the global fund market with invested assets in the jurisdiction reaching €2.6 billion. Cyprus is a quickly rising destination for investment funds due to its favorable tax laws, skilled workforce, and digital service-minded public and private administrative providers. The country has a growing number of alternative investment funds and real estate funds as well as traditional investment funds.
Major Cyprus Industries With Stable Performance
Despite the lingering worldwide effects of the Covid-19 pandemic and a fresh wave of global inflation, a collection of diverse industries demonstrate the stability of these sectors in driving the Cyprus economy towards growth and resilience in 2023. Reliable and highly-contributing industries in Cyprus forecasted for the year include:
Tourism is a significant contributor to the Cyprus economy and government officials forecast 2023 to be a record year for tourism in the country. The island’s warm climate, beaches, historical sites, and natural beauty make it a popular destination for tourists. The industry was impacted by the COVID-19 pandemic but is demonstrating quick recovery as the situation improved. In fact, Britain’s Travel association just listed Cyprus among the 10 most popular destinations that U.K. residents plan to visit in 2023.
Cyprus has a favorable tax regime and is a popular destination for foreign investment, particularly in the real estate sector. The island has a large number of properties available for sale, including apartments, villas, and holiday homes, as well as many developments for commercial real estate spaces in key cities such as Limassol.
Financial and Professional Services
Cyprus is home to a well-developed financial services sector, which includes banks, financial service providers, insurance companies, and investment firms. The country has a favorable tax system and a large number of international companies have set up operations there, remaining relatively stable and continuing to highly support a wave of foreign investments and business start-ups.
Cyprus is a major international shipping center and is home to a large number of shipping companies and ship management firms. The shipping industry is set to expand further with announcements of giant global shipping-owning companies relocating activities to the jurisdiction.
Cyprus has a growing energy sector and is working to develop its natural gas resources and renewable energy outputs through solar power energy initiatives.
The pharmaceutical sector in Cyprus is relatively small, but it is growing and is expected to become an important industry for the country in 2023 as the government promotes incentives toward businesses in this field.
Cyprus has a favorable tax regime and is a popular destination for foreign investment, particularly in real estate. According to CEIC Data’s 2022 Quarter 3 findings, foreign direct investment in Cyprus rose by $23.6 billion.
The Forces Behind The Economic Growth in Cyprus
Achieving its goal of becoming a business hub, Cyprus has a lot to offer foreign nationals interested in business and investment opportunities, including:
- Strategic Location: Cyprus is located at the crossroads of Europe, Asia, and Africa, making it an ideal location for businesses looking to access these markets.
- Favorable Tax Regime: Cyprus has a favorable tax system, with one of the lowest corporate tax rates in Europe (12.5%) and a wide network of double tax treaties, making it an attractive destination for foreign investors looking to minimize their tax burden.
- Well-Developed Infrastructure: The island has a well-developed infrastructure, including a modern telecommunications system, global ports, and international connectivity.
- Skilled Workforce: Cyprus has a skilled and educated workforce, with a high percentage of the population fluent in English, which can be beneficial for companies looking to establish operations in the country.
- Resilient Economic Indicators: The Cyprus economy has been growing steadily and has been showing signs of recovery after a period of economic downturn caused by the Covid-19 pandemic.
- Diversified Business Sectors: Cyprus has diversified business sectors beyond just tourism, real estate, financial services, shipping, energy, and pharmaceuticals that are considered healthy and expected to continue to grow in the future.
- Easy to Do Business: Cyprus has a relatively simple and efficient legal system and a low level of bureaucracy, making it relatively easy to start and operate a business in any of the sectors driving the Cyprus economy.
- Accessible Residency Programs: Cyprus offers a number of attractive residency programs for foreign nationals which allows investors to obtain residency in exchange for an investment in the country or through real estate avenues.
- EU Membership: Cyprus is a member of the European Union (EU), which gives businesses access to the EU’s market and the ability to trade freely with other member states.
All of these factors make Cyprus an appealing destination for businesses and entrepreneurs looking to establish a presence in the Eastern Mediterranean region.
Comprehensive Analysis of 2023 Growth Trends
The Aspen Trust Group aids foreign nationals with making informed and industry-specific decisions to promote tailor-made, sustainable financial development to reach their own growth goals. Get detailed recommendations on strategic decisions and actions to capitalize on modern opportunities and mitigate risk for any of the sectors driving the Cyprus economy in 2023 by contacting our experts today.